What is Wrong With The Public Auction Process?
Interesting question that I am continually asked regardless of the time within the property cycle. “Mark, do you think that we should sell via Public Auction, Private Treaty of Expressions of Interest”?
The simple answer, why not auction? In fact, in my opinion, it is to some degree the preferred method of sale, but it is not for everyone.
The process is simply falling down and perhaps will never be fixed due to the inadequate policing of the process. The Real Estate Institute of Victoria has really tried, but is stuck by the inadequate enforcement of continued “underquoting” of which is policed by the State Government and Consumer Affairs Victoria.
First Valuation Group is in a privileged position of actually knowing what properties are worth. For the unassuming, it is an absolute joke as to what is going on in the current real estate market with time, money and effort resulting in no acquisition.
Here are two (2) examples of properties just listed in 2020 on a hypothetical basis:
- A modern contemporary residence of which is to be auctioned. Statement of Information states a price range of $2,500,000 to $2,750,000. Vendor requires $3,000,000 to $3,200,000.
- A townhouse style residence of which is to be auctioned. Statement of Information states a price range of $1,450,000 to $1,595,000. Vendor requires $1,800,000 plus.
The issue is there is a requirement under law to provide comparable sales for the protection of the consumer. Simply, at the quoted sums within the Statement of Information, the Vendors will not sell. Speak to the selling agents and they are telling Vendors that they are creating competition by quoting under Vendor expectations. Again, create competition. What they are doing is getting away with conditioning Vendors and Purchasers alike. The only winner being the real estate agent.
In both instances, the script probably reads like this to the Vendor. We know what you want, we don’t think it’s worth that, but we have to agree to get the listing, let’s play the game of real estate, being one quote to the Vendor to get the listing, underquote to the Purchaser and by doing so, and condition the Vendor.
You will notice that agents from the first week of campaign to the auction rarely, if at all, change the Statement of Information.
Okay, we have the listing, let’s quote low, and hopefully we can condition the Vendor down to sell.
The legal part goes like this. We used sales that are not comparable, we act as if we don’t know and we place something in the box to get away with it.
Wake up Melbourne, the system is being ruined!!
Why do I care? For many reasons, but importantly for professional reasons. For the time and cost associated by those trying to acquire residential real estate. In particular, for those individuals that don’t know better. For those that will be bitterly disappointed, both Vendor and Purchaser.
Thinking about the time, effort and opportunity cost of being wrong in areas that you are meant to be a specialist and should know each and every sale, further know every potential Purchaser. Consumer Affairs needs to wake up and rattle the train, not once a year, but each and every week.
As FVG Property are both Vendor and Buyers Advocates with over 30 years’ experience, both as a property valuer and real estate agent, if you need “live data”, expert opinion, actual data trend knowledge, information and usual professional antics, call me now.
The one phone call and discussion will save you money, as either a potential Vendor or Purchaser.
Mark Ruttner 0411 419 674